Roth 401k Excess Contribution

Forum|Forum|6 years ago
March 3, 2020
2 replies
351 views

If I had an over contribution to my Roth 401k in 2019 ($1300) and removed the excess ($1300) and associated gains ($160) before April 15 2020, how would I go about reporting this to the IRS for my 2019 taxes? I did not receive a corrected W2. Would I edit box 12b in the W2 to subtract out the over contribution and report that over contributed amount ($1300) in misc income somewhere else? And I would deal with the gains in the following year's taxes correct? Thank you!!

macuser_22

Alumni - Champ

Correct. You should receive a 2020 1099-R with a code 8 in box 7 to report the taxable earnings on your 2020 tax return.

Because 401(k) Roth contributions are after-tax money then when returned it is not a taxable event - there really is no place to report money that you already paid tax on and is not income.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

vc4

Level 2

Just to clarify:

1. Do I need to manually edit w2 box 12b with updated ROTH contributions? Will it not flag IRS because of the mismatch?

2. Why do I need to again report $1300 as misc income? Shouldn't it's already be part of W2 box 1 right?

macuser_22

Alumni - Champ

@vc4 wrote:

Just to clarify:

1. Do I need to manually edit w2 box 12b with updated ROTH contributions? Will it not flag IRS because of the mismatch?

2. Why do I need to again report $1300 as misc income? Shouldn't it's already be part of W2 box 1 right?

1) No. You do not change the W-2. The W-2 reports the contribution in box 12 that reports what happened, you cannot change what happen in the past.

2) You do not report a 401(k) Roth (Designated Roth) as misc income because Roth contributions are always after-tax money so it is not taxed again when returned and not reported anywhere as income. Only the earnings (if any) that are returned are taxed in the year returned, not the year contributed if different years.

For information see IRS Pub 525 page 10
https://www.irs.gov/pub/irs-pdf/p525.pdf

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

Ak3221

Level 2

Hi,

I couldn’t withdraw my excess contribution to Roth 401k in time, and I am not clear on should be my next steps. Can you please share?

DanaB27

Level 15

If you do not take out the excess amount by April 15th, then you are taxed twice on the excess. You will have to include this amount in your taxable income when you take the distribution even though the contribution was from after-tax money. When you get Form 1099-R for the distribution it will have to report it as a taxable distribution.

@Ak3221

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